On December $2,2023,$ Foger Inc. purchased a put option from Fidelity Investments Corporation for $$1,000.$ The option allowed Foger to sell $5,000$ shares of Alphabet stock at a price of $$150\mathrm{.}00$ per share before June $30,2024.$ Foger treats their Alphabet shares as AFS investments and counts them using the FV$-$OCI method. On December $2,2023,$ Alphabet shares were trading at $$150\mathrm{.}00$ each. On December $31,2023,$ Foger$$s SFP date, the Alphabet shares were trading at $$147\mathrm{.}50$ each, and the option was trading at $$18,000.$ On May $15,2024,$ Foger settled the option when the Alphabet shares were trading at $$146\mathrm{.}00,$ and the option was trading at $$23,000.$ Foger has elected NOT to use hedge accounting for either the option or the AFS investment.

Instructions

$1.$ Indicate the intrinsic value and time value of the option on the following dates:

a$)$ December $2,2023.$

b$)$ December $31,2023.$

c$)$ May $15,2024.$

$2.$ Prepare the journal entries to record the above transactions on the following dates:

a$)$ December $2,2023.$

b$)$ December $31,2023.($Be sure to record the changes in AFS investment$)$

c$)$ May $15,2024,$ assuming that Foger settled the option in cash and received $$20,000.$

d$)$ May $15,2024,$ assuming that Foger settled the option by making delivery.

Note, by settling the option on before the expiration date on May $15,2024,$ Foger would give up the time value of the option as of May $15,2024.$